Once again we see the mortgage rate curve head lower. How low will they go and how long will they remain low? Well, we don’t know but we can try and understand how rates behave.

First, mortgage rates feed off of Treasuries and (MBS) or Mortgage Backed Securities. The bitter-sweet pattern here is that as the stock market and commodities like Oil lose value and equity, investors seek safety in Treasuries like 10 year Bonds. As investor sentiment shifts away from the “Green-Shoots Theory (economic recovery) to a feeling of economic stagnation, investors practice Risk Adverse Trades or safer investing. Investors move money into safe assets like Treasuries and MBS and this "flight to safety" helps treasury yields move lower which allows MBS prices to move higher, therefore giving lenders the opportunity to reduce consumer borrowing costs.

That said, how do you play this market?

First and foremost rates continue to be at historic lows. For instance, a year ago the average rate on a 30 year FRM (Fixed Rate Mortgage) was around 6.5%. Today you can obtain a 30 year FRM for about 5.125%. If these rates don’t do it for you, you can also position yourself to lock an even lower rate when and if the market accommodates.

This positioning is simple. Imagine loading your 6-shooter, aiming and waiting for the right target, in this case a low rate. To load your mortgage pistol, you need to get qualified based on your income, credit and equity. From here you and your trusted mortgage professional can pull that trigger when the time is right. If the desired rate does not come around to the level where you are comfortable and content, you put your gun down and move on. But if you have a window of a day or even an hour and the rate peeks its little head out, you shoot and lock it in. If you don’t have the gun pulled and pointed in the right direction, that rate can easily slip right through your fingers.

Are you ready?

Contact me or any of our Aequor Funding Loan Specialists to position yourself.

All my best,

Rod Manrique
Senior Loan Officer
Aequor Funding Corp.

These days, in this economy, there are not too many individuals looking to invest in mortgage backed securities. However, what if those mortgage bonds were backed by the government, as U.S. Treasury bonds are? This is when Uncle Sam would and has stepped in to pay the principal and interest to investors if one of the home loans backing the security went into default. As a result this has created a boom in regards to the Government National Mortgage Assn. The agency, better known as Ginnie Mae, generates mortgage-backed securities from loans insured or guaranteed by the Federal Housing Administration and the Department of Veterans Affairs.

Ginnie Mae said Monday that it issued $43.5 billion in mortgage-backed securities in June, the first time the $40-billion barrier was broken. In the first six months of 2009 Ginnie Mae nearly doubled from last year at this time which is a great sign of the due-diligence on the Government’s behalf to fill a much needed void in the mortgage industry. In a news release, Ginnie Mae President Joseph Murin said: "Ginnie Mae's ability to provide a safe security for investors and critical liquidity for issuers is why the corporation was created more than 40 years ago."
The Mortgage Bankers Assn. reported last week that FHA and VA loans represented 35.9% of new mortgage applications in June, the highest level since November 1990. To give an idea of how these have grown in August 2005, a mere 6.8% of mortgage applications were for these federally backed loans now on a daily basis we are seeing more and more people actually requesting options with such programs. Ginnie Mae, a part of the Department of Housing and Urban Development, was set up to bolster the housing market and it is doing just that with refinancing and purchase loans being higher in June than they have in three months. Unlike Freddie Mac and Fannie Mae, Ginnie Mae was never publicly traded. In a report by Fitch Ratings Monday the contrast between government-guaranteed Ginnie Mae’s and private mortgage securities was underscored noting delinquencies on securities backed by commercial loans jumped by $2.2 billion in June, a record high. So when considering a refinance or new purchase do not dismiss Ginnie Mae and do not get turned off by the fact that these are mortgage-backed securities because they are proving themselves to be a very positive route in a very uncertain time for many people.

I remember a time when most borrowers only wanted a 15 year fixed interest rate loan. These borrowers became disenchanted with constantly adding more years to the remaining balance of their current 30 year mortgage. Today, more people are working more years past the age of retirement. I hear the statement that I can’t afford to retire over and over again. With longer life expectancy we need to plan ahead regarding our largest monthly expense; our mortgage payment.

Borrowers in their 50’s should again start thinking about the 15 year fixed rate mortgage. The ability to retire in your early 60’s will be affordable with no mortgage payments. Most people don’t realize that FHA 15 year mortgages have no monthly mortgage insurance premium, they offer cash out refinancing to 85% and rate and term refinancing to 96.5%. Additionally, credit scores as low as 620 and debt ratios as high as 60% are available. Today’s rates on FHA 15 year term mortgages are as low as 4.5% for most borrowers.

Experts agree that individuals should wait until they
reach full retirement age before collecting social security benefits. At age 65 to 66 you can collect almost 30% more than at age 62. By refinancing to a 15 year fixed rate mortgage in your early 50’s, you will be on the right track to benefit most from having no mortgage payments at age 65 and the ability to claim higher social security benefits. It’s true you can have the best of both worlds.

Why not take the time to call AEQUOR FUNDING CORP. to speak with one of our loan specialists and see how you can benefit from a 15 year term mortgage.

Many home owners are missing a golden opportunity by not refinancing to a 15 year mortgage. Most borrowers are looking to save $100.00 to $200.00 per month by refinancing their mortgage. This concept represents an average annual savings of approximately $1,800.00 per year. With 15 year fixed interest rates as low as 4.625% the savings vs. a 30 year 6% loan can be in excess of $300,000.00. This opportunity may not exist for long. In planning for one’s retirement in today’s economic environment, a 15 year mortgage payment can be the best way to achieve financial freedom in the future. Homeowners should also consider the rapid increase in equity that is achieved by having a 15 year mortgage. In as little as 9 years your mortgage payment and interest payment are at a 50/50 ratio. A 30 year term loan takes over 21 years to reach this same ratio.

No one was prepared for the tremendous economic down turn that we have been experiencing over the last several months. Many home owners have seen the values of their home depreciate by as much as 30% in some areas of the country. Along with this 401k plans, stocks, bonds and other investments have suffered as well. It may serve one well to look into the concept of a 15 year term loan. Our highest income producing years are usually from the age of 40 to 55 years old. Why not put this to use by paying down your current mortgage at a lower interest rate and rapid term. Our professional staff of senior loan officers at Aequor Funding are available to discuss the benefits of this concept with you. Why not give us a call today.

Martin Cornbluth
Aequor Funding Corp.
Senior Loan Officer

As a mortgage professional, my greatest reward is witnessing a client’s reaction to grants, programs, and benefits they had no idea were available to them. It is my job and passion to stay informed in an ever-changing industry in order to help my clients achieve their dream of homeownership or a better way of life through debt restructuring.

Did you know?
From hud.gov (05/29/09), The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate.

What programs can help you?

Find out more about this government program and others like it by contacting Aequor Funding today.

Rod Manrique
Aequor Funding Corp.
Senior Loan Officer